25 years of reforms: How abolition of licensing allowed Indian companies to make decisions in their boardrooms

Infosys became an icon of wealth creation in the country, spawning over 200 dollar millionaires and about 20,000 rupee millionaires through its employee stock option plans.ET Bureau | July 21, 2016, 09:30 IST

​Infosys was a 10-year-old company with just one international office in Boston. NR Narayana Murthy was just another struggling entrepreneur, running from pillar to post, trying to get licences for importing computers.

Murthy went on to become a doyen of the Indian IT services business. Infosys became an icon of wealth creation in the country, spawning over 200 dollar millionaires and about 20,000 rupee millionaires through its employee stock option plans. Infosys revenue grew from $1.5 million in 1992 to $9.5 billion in 2016.

First, we did not have current account convertibility, so even if I had to travel abroad for one day, I had to apply to the Reserve Bank of India. That appears stupid today. I had to wait for 10-12 days. They might or might not get back. So, opening an office abroad, hiring consultants from abroad, having sales people abroad — they were possible before 1991.

Second, we had an official called the Controller of Capital Issues, who incidentally did not understand capital markets at all. He was a civil servant sitting in Delhi. Nobody ever asked a question about why he was sitting in Delhi and not in Bombay, where the capital markets are. He rarely gave any premium on par value. When we went to the Controller of Capital Issues in 1990, for a Rs 10 par value share, he said that he would allow me Rs 11. We went to Rs 95 in 1993 when this was abolished by Manmohan Singh.

There was also such a strict licensing regime to import a computer that it took me three years and I went about 50 times to Delhi. Those days I couldn’t afford a flight, so I took a train. I had to stay in some seedy place near Old Delhi Railway Station. Even that cost money for a fledgling company.

For new companies, there was such a heavy tariff because even before you got a licence, 50 visits meant — even if it was $500 a trip (at that time, it was Rs 6 per dollar) — $25,000 spent on a $100,000 computer before you bought it or got a licence.

The officers did not know anything about computers. They would quibble about small things. Why do you need 64MB of memory? Go with only 48MB, they would say. Let’s say, if one got a licence after two years of running around, one would discover that the models one got the licence for had become old in the US.

India was always three generations behind. Once licensing was abolished, it allowed companies to make decisions in their boardrooms rather than in the corridors of North Block.